WASHINGTON The U.S. Commodity Futures Trading Commission on Thursday proposed a rule that would ensure all market players have equal access to bids and offers from exchanges and other trading platforms.
The futures regulator said the rapid development of technology, products, and platforms since 1990 and volume increases generated by market participants using co-location services have made it necessary to ensure the market is "equitable, open and fair.
Critics have said high-frequency traders, who place their computer systems next to exchange servers -- a process known as co-location -- have an unfair advantage by getting an early look at buy and sell orders.
The co-location rule, which the CFTC said was necessary "to deter and prevent potential disruptions to market integrity," is slated to be published in the Federal Register on Friday and will be open for public comment for 30 days.
Here are some details from the rule. To read the full rule please go to: r.reuters.com/xav39k
* Require co-location and proximity hosting services be available to all qualified market participants willing to pay for the services.
* Access should be equitable, open and fair, and comply with exchange and CFTC regulations
* Providers must ensure sufficient availability of services for any and all willing and qualified market participants. For example, if the availability of a service became limited, thereby leaving some market participants or third-party hosting providers without adequate access, the CFTC would not view access to those services as open and fair.
* Rule will ensure exchanges and other trading platforms are not the "only game in town" when it comes to co-location and proximity hosting services.
* Would ensure fees are not used as a means to deny access to some market participants by "pricing them out of the market."
* Fees need to be uniform and nondiscriminatory depending on the various services provided.
* Would require general information concerning the longest, shortest, and average delays that occur in transmitting buy and sell orders (latency) for all connectivity options to be available to the public on markets' websites.
* Will also study an alternate approach for disclosing latency information that would be based on the percentile of speed rather than longest, shortest and average latencies.
* Seeking public comment on how latency information should best be disclosed so market participants can determine whether the benefits from co-location services are worth the cost.
* Exchanges and other platforms would have to obtain all information about market participants, their systems, and their transactions from third-party providers in order to comply with exchange and CFTC regulations.
* Would ensure they do not bar otherwise qualified third-parties from providing co-location or proximity hosting services to market participants.
(Reporting by Christopher Doering and Roberta Rampton; Editing by Sofina Mirza-Reid))